53 responses

  1. krantcents
    February 16, 2012

    I do many, but not all of those things. I max out my 403B, IRA nad Roth IRA. I refinanced my 30 year mortgage about 8-9 years ago tto a 15 year mortgage. I never bought a used car though, but I do keep my cars (17 & 15 years old)forever. I still use credit cards, but always pay off the balance every month. I have never done the other things! Does this make me unconventional? I would guess, yes.

    • moneycone
      February 20, 2012

      Very unconventional and may I add, very smart KC!

  2. DIY Investor
    February 16, 2012

    I agree with all of them. There is always some thinking involved. Some 401(k)s are very well structured – others are not. Many providers see themselves as monopolies once they are appointed because they know that people will automatically participate.
    There used to be one framed along the lines of “…you can’t lose in real estate”. Haven’t heard that one in a while!

    • moneycone
      February 20, 2012

      Haha, so true DIY!

  3. BeatingTheIndex
    February 16, 2012

    Great Post MC, I am the type who follows your unconventional wisdom. Got a standard mortgage of 25 yers but I dum the maximum lump sum payments allowed every year. CC wise, I regularly use 1 card but I never have a balance on it when the bill is due.

    The fees on RYSYS are painful, I can’t believe they can still get away with it!

    • moneycone
      February 20, 2012

      Fees are a killer here too! Not keeping a balance is the best way to use a credit card!

  4. Squirrelers
    February 16, 2012

    Good post, I like the way you succinctly made the case for going against advice that some strongly advocate. The 2 that caught my eye most were:

    1) 15 yr vs 30 yr. Agreed that we want our debt paid down and eliminated quickly. That said, some people have limited emergency funds and don’t need to cut things too close. Just because someone has a 30 year loan doesn’t mean that they can’t strive for paying it off earlier. It’s effecively insurance that one is paying, by opting for a lower payment and higher rate/loan length. But, it can be a good choice for some. I agree.

    2) Avoiding Credit Cards. I agree that credit cards aren’t inherently evil things that need to be avoided. If one has discipline, and pays them off in full each month, it’s a good tool to have at one’s disposal, and can be used to help build a good credit history. Plus, it makes tracking expenses a lot easier – at least for me.

    • moneycone
      February 20, 2012

      Definitely Squirrelers. No solution is a one-size fits all solution. Evaluate all advice (including the advice on this blog!), before acting on it.

  5. retirebyforty
    February 16, 2012

    My 401(k) just moved to Fidelity Brokerage link.
    I can buy anything I want and that’s the way I like it!

    Avoid credit card. This works for me. I always pay off the balance every month, but I spend more if I use the credit card. Cash is harder to part with for me personally. :)

    • moneycone
      February 20, 2012

      If you have a good 401K provider with low fees, by all means max it out! Lucky you RB40!

  6. The Financial Blogger
    February 16, 2012

    I don’t follow half of them ;-)
    - I bought a brand new car because I wanted to have a nice car for the next 10 years (I’m at year 3 and I still LOVE my car!)

    - I’ve withdrawn from my retirement plan to buy my house and I certainly don’t regret it. It allowed me to buy my house faster instead of seeing its price skyrocketing while I wait to have enough savings.

    - I put every single expenses on my credit card… over the past 4 years, I’ve paid interest on it only once. This year, I’m taking my family (wife + 3 kids) to Disney World with my points ;-D

    great post ;-)

    • moneycone
      February 20, 2012

      I have a friend who has an awesome gaming rig, very cool and very expensive. But here’s the thing: I would never advice him that he spent too much on it because that is his passion. He is in fact very frugal otherwise!

      The same goes for some one who is an avid sports fan and loves his monday night footballs. I wouldn’t advice him to get rid of cable.

      Be happy, not miserable!

  7. Aloysa @ My Broken Coin
    February 16, 2012

    What if the company doesn’t math your 401K contribution? We put aside what we can, but we are unable to max it out. We need to pay down debt and build some cash reserves.
    As far a used car goes, that is exactly what we did: we got a used car that still was under warranty.

    • moneycone
      February 20, 2012

      Aloysa, if you don’t have a company match, first max out your IRA limits. If you still have savings left, put it in your 401K.

      With an IRA you have a lot more control.

  8. Maggie@SquarePennies
    February 16, 2012

    I agree on everything, except for the car advice. We always buy a new car because my husband does most of our car work & he doesn’t like inheriting the results of a previous owner’s bad habits. He takes very good care of our vehicles & is almost religious about it. He wants to be 100% certain of how the vehicle was maintained. Most people don’t have the time or inclination for that.

    • moneycone
      February 20, 2012

      If you are passionate about something, go for it! You are exactly right, most people don’t have the time or inclination to learn about their vehicles!

      But if you love doing what you do, enjoy it!

  9. Dave Hilton
    February 17, 2012

    I used to spew the “Avoid Credit Cards” mantra, too! I’m starting to realize (in the same way you describe) that credit cards aren’t evil…paying interest a the balance is.

    After years of avoiding them (because of typical, stupid mistakes), I have successfully used a low limit card over the last year & just applied for a new rewards card.

    What’s more important, in my opinion, is your (or my) ability to avoid temptation & using it to pay for stuff I don’t really need.

    I think I finally have it figured out…this time.

    • moneycone
      February 20, 2012

      Not having the inclination to not use a credit card is good. Shows strength of character and discipline, but when you consider how the cost of doing a transaction is already factored into the products you use whether you pay using cash or card, it just makes sense to get back what is rightly yours!

  10. Sfi
    February 17, 2012

    Mc,

    The problem i see a lot with maxing 401ks is that people put all or most of their savings there. You want balance you need short term money, taxable savings and investments. I have 2/3 taxable 1/3 retirement.

    Also retirement plans have a cash option its just not called cash. Look for the words ‘stable value’ or ‘money market’. Be careful here some of these funds also have high expenses.

    • moneycone
      February 20, 2012

      On keeping cash, it depends upon your provider. My previous provider did not have even an option for treasuries!

      My current one has, but there are fees. This is exactly why I prefer IRAs. I get to choose how I invest.

  11. Kris @ Everyday Tips
    February 17, 2012

    This is a great post. I have subscribed to many of these beliefs. My husband and I both max out our 401k to reduce our tax burden. I actually never thought of doing any different, I just really wanted to tax break.

    I also switched to a 15 year mortgage from a 30 when I refianced once because the difference in payments was minimal, and I do think that was a good decision for US. However, the economy was better back then too.

    I do love my credit card rewards. Earned 1500 last year! (although that also indicates how much I spent, although quite a bit was work expenses for my husband.)

    • moneycone
      February 20, 2012

      You guys obviously put some serious thought on how to manage your finances. I wish more couples did that!

  12. Little House
    February 17, 2012

    Very solid advice. I think that every ounce of wisdom needs to be taken with a grain of salt. Everyone’s situation is different, and advice for one person may not work for another.

    However, the bottom line is people have to plan and save for the future. I know that in my field of work, I have the option of a 457 (I think that’s what it is) on top of a 403(b). My goal is to invest in both within the next 18 months. The 457 allows me to max it out somewhere around $16,000 which is a great option. Research your options is all I can say!

    • moneycone
      February 20, 2012

      Definitely LH. No one size fits all solution. Saving is never bad. But do try to pick the best savings strategy.

  13. BusyExecutiveMoneyBlog
    February 17, 2012

    I do a lot of this as well. Max out 401K and get full company match. No credit cards. Always buy used cars (3 yrs off lastest model year) as I find that to be the best value.

    • moneycone
      February 20, 2012

      Buying a slightly used car is a good money saving strategy!

  14. Shilpan
    February 17, 2012

    You are right about 401(k). I think you can manage Roth part of 401(k) on your own. Also, I always move money from 401(k) to self managed IRA once I leave a company.

    • moneycone
      February 20, 2012

      Good idea Shilpan!

  15. Miss T @ Prairie Eco-Thrifter
    February 17, 2012

    We do a lot of these things too. I like your idea about buying a used car still under warranty. That makes a lot of sense. I will definitely keep this in mind if we need to buy a new car.

    • moneycone
      February 20, 2012

      Glad you liked the post Miss T!

  16. Ms. Thriftability
    February 17, 2012

    Buying a house with a 30 year mortgage and paying it off in 15 is an excellent way to get ahead financially. Even if you can’t make it by the 15 year mark,think of what you might save in interest if you were able to pay it off in 18 years, or even 20. Great article – thanks!

    • moneycone
      February 20, 2012

      Exactly Ms. Thriftability!

  17. Roshawn @ Watson Inc
    February 17, 2012

    I enjoyed this post although it conflicts me. I definitely don’t espouse 1 size fits all in every single situation, but I do guide my decisions based off of certain principles. That’s what I advocate, but I certainly appreciate where you are going. It’s brings up very interesting contradictions in advice versus reality. Another great post!

    • moneycone
      February 20, 2012

      Thanks for your honest thoughts Roshawn. Of course, there is no one-size solution that will fit all. Evaluate your financial needs and act accordingly. But having a broad awareness on what’s out there will definitely make the decision making process easier.

  18. SB @ One Cent At A Time
    February 18, 2012

    Very good ideas. I was contributing too much in my 401 (k). In January I did a reduction and now saving only 5% to get 100% company match.

    If we keep aside the PMI point, taking out loan from retirement account is not a good advice in general to me.

    • moneycone
      February 20, 2012

      Good for you SB! In general, taking out a loan against your retirement funds is not good. Do it only if you think you can put the money to better use. PMI was one example.

      Taking money out of your 401K to buy a Hummer isn’t very prudent!

  19. World of Finance
    February 18, 2012

    You had me at the title. Great article MC :)

    • moneycone
      February 20, 2012

      Glad you liked the post WoF!

  20. femmefrugality
    February 18, 2012

    I like the advice about a used car under warranty. That’s the way mine was. I guess it technically wasn’t “new…” had 4k on it, but it was under warranty for a long time and has been totally worth the monthly payments.
    And thanks for sharing the math on the 15 vs. 30 year mortgage. Definitely something to think about in the next couple years.

    • moneycone
      February 20, 2012

      Thanks for visiting FF! I hope to see you here more often!

  21. Ella
    February 19, 2012

    I do most of those and I love the mortgage idea. Have recently considered to ask my bank to change my mortgage from a 30 years mortgage to a 15 or 20 years but after I read your post I might as well do extra payments instead and keep it at 30 years

    • moneycone
      February 20, 2012

      Always evaluate your options Ella. It is very good you are thinking different and not just continuing to do what you always did with the 30 year mortgage.

      More information is more power!

      Thanks for visiting!

  22. Buck Inspire
    February 19, 2012

    Awesome advice. Are you trying to be the personal finance version of the Myth Busters? Nice job!

    • moneycone
      February 20, 2012

      Haha! That could’ve been an excellent title for this post Buck!

  23. Untemplater
    February 19, 2012

    I love my rewards credit card! I usually don’t keep a balance on it but I love using it to rack up points to get cash back. It feels great getting “free” money back and I use those funds to help my parents. -Sydney

    • moneycone
      February 20, 2012

      Hey it is your money, you should have it when… you reach your rewards threshold!

  24. Taline
    February 20, 2012

    Awesome post! I agree with the entire content!

    It amazes me how so many people don’t evaluate their personal financial situation and follow advice that may not necessarily be good for them.

  25. John | Married (with Debt)
    February 20, 2012

    People who like to perpetrate the 15/30 myth act like they can’t pay extra on their 30 year mortgage. If you are unsure about your finances, it makes sense to give yourself some breathing room on your mortgage, rather than locking yourself in to high payments.

  26. Robert @ The College Investor
    February 21, 2012

    I’d challenge the buy a used car wisdom. I recently found that a used Toyota Camery costs as much as a new one! Buy new, and get all the perks that come with it (like a warranty).

  27. Christa
    February 22, 2012

    Very true that what works for some people won’t necessarily work for others. I tried to follow some of these unconventional wisdom tips in the past, and I wasn’t disciplined enough to do so. For me, a 15-year mortgage and no credit cards are musts; otherwise, I just spend too much!

  28. Hunter – Financially Consumed
    February 23, 2012

    Excellent post MC! I especially like your ebuff of ‘don’t raid your retirement funds’. The Roth IRA is perfect for this. It’s a super efficient savings vehicle and we should never be penalized for withdrawing our own after-tax contributions. The incentives are in place to encourage us to leave it there, but once again the flexibility is convenient.

  29. 101 Centavos
    February 28, 2012

    What a great post, MC. Agree with going against the grain on the 401K strategy. Using 401K to buy hard assets which go increase in value is a good strategy, especially since the interest is paid to yourself.

  30. Joshua Christensen
    April 24, 2012

    The 401k and IRA vehicles as a retirement plan concern me. Anytime the Gov’t is involved in ‘creating’ retirement planning, I grow weary. Consider these factors. 1. Company Match of 5% 2. Gov’t 10% Penalty if withdraw prior, to 59 (a fine of sorts) 3. Taxes are likely to be higher in the future 4. Value of the dollar lower in the future.

    If an emergency arises and funds are needed prior to 59, the 10% penalty erodes any company match. Put it like this, we put our money in ‘jail’ to take it out later when it is taxed higher and worth less.

    I’m not sold on investing in gov’t sponsored anything. I’m not anti-retirement planning, I simply don’t believe in replacing income with a fixed asset. Fixed assets are great for supplement but a poor income replacement strategy.

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